<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES MassMutual Corporate Investors
- --------------------------------------------------------------------------------
December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
------------- ------------
<S> <C> <C>
Assets:
Investments (Notes 2A, 2B and 5)
(See Schedule of Investments)
Corporate restricted securities at fair value
(Cost 1996 - $136,885,662; 1995 - $107,891,090) $144,807,102 $122,100,451
Corporate public securities at market value
(Cost 1996 - $52,767,684; 1995 - $64,555,717) 56,802,684 69,912,193
Short-term securities at cost plus earned discount which
approximates market value 819,835 3,173,413
------------ ------------
202,429,621 195,186,057
Cash 83,336 2,525,299
Interest and dividends receivable, net 3,016,401 3,762,567
Receivable for investments sold 682,534 1,190,486
------------ ------------
Total assets $206,211,892 $202,664,409
============ ============
Liabilities:
Dividend payable $ 6,470,220 $ 6,895,893
Payable for investments purchased 348,125 4,315,505
Management fee payable (Note 3) 646,010 632,111
Note payable (Note 4) 20,000,000 20,000,000
Interest payable (Note 4) 136,211 136,211
Accrued expenses 131,171 136,763
Accrued taxes (Note 2D) 6,210,942 1,984,882
------------ ------------
Total liabilities 33,942,679 34,101,365
------------ ------------
Net Assets:
Common shares, par value $1.00 per share;
an unlimited number authorized 4,256,724 4,256,724
Additional paid-in capital 98,590,717 98,590,717
Retained net realized gain on investments, prior years 45,912,935 42,226,727
Undistributed net investment income (Note 2D) 17,789 223,553
Undistributed net realized gain on investments 11,534,608 3,699,486
Net unrealized appreciation of investments (Notes 2A, 2B and 5) 11,956,440 19,565,837
------------ ------------
Total net assets 172,269,213 168,563,044
------------ ------------
Total liabilities and net assets $206,211,892 $202,664,409
============ ============
Common shares issued and outstanding 4,256,724 4,256,724
============ ============
Net asset value per share $ 40.47 $ 39.60
============ ============
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
4
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS MassMutual Corporate Investors
- --------------------------------------------------------------------------------
For the years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
------------- ------------
<S> <C> <C>
Investment Income (Note 2B):
Interest $ 14,987,055 $ 14,506,509
Dividends 323,800 541,626
------------ ------------
Total income 15,310,855 15,048,135
------------ ------------
Expenses:
Management fee (Note 3) 2,643,359 2,434,580
Trustees' fees and expenses 103,647 95,152
Transfer Agent/Registrar's expenses 101,901 105,494
Custodian's fees -- 19,764
Interest (Note 4) 1,066,000 1,066,000
Reports to shareholders 34,080 34,080
Audit and legal 57,291 63,016
Other 29,297 52,398
------------ ------------
Total expenses 4,035,575 3,870,484
------------ ------------
Net investment income 11,275,280 11,177,651
------------ ------------
Net realized and unrealized gain (loss) on investments (Notes 2A and 2B):
Realized gain on investments 21,660,569 10,338,634
Provision for federal income tax (Note 2D) (6,210,942) (1,984,882)
------------ ------------
Net realized gain on investments 15,449,627 8,353,752
Net change in unrealized appreciation of investments (7,609,397) 24,633,501
------------ ------------
Net gain on investments 7,840,230 32,987,253
------------ ------------
Net increase in net assets resulting from operations $ 19,115,510 $ 44,164,904
============ ============
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
5
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF CASH FLOWS MassMutual Corporate Investors
- --------------------------------------------------------------------------------
For the years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
------------- ------------
<S> <C> <C>
Net increase (decrease) in cash:
Cash flows from operating activities:
Interest and dividends received $ 15,242,192 $ 13,505,631
Interest expense paid (1,066,000) (1,066,000)
Operating expenses paid (2,961,268) (2,681,205)
Federal income tax paid (1,984,882) --
------------ ------------
Net cash provided by operating activities 9,230,042 9,758,426
------------ ------------
Cash flows from investing activities:
Change in short-term portfolio securities, net 2,539,948 1,820,308
Purchase of portfolio securities (128,592,743) (113,804,230)
Proceeds from disposition of portfolio securities 130,215,803 116,657,281
------------ ------------
Net cash provided by investing activities 4,163,008 4,673,359
------------ ------------
Net cash provided by operating and investing activities 13,393,050 14,431,785
------------ ------------
Cash flows from financing activities:
Cash dividends paid from net investment income (11,691,554) (10,454,506)
Cash dividends paid from net realized gain on investments (4,143,459) (1,464,321)
------------ ------------
Net cash used for financing activities (15,835,013) (11,918,827)
------------ ------------
Net (decrease) increase in cash (2,441,963) 2,512,958
Cash - beginning of year 2,525,299 12,341
------------ ------------
Cash - end of year $ 83,336 $ 2,525,299
============ ============
Reconciliation of net increase (decrease) in net assets to net cash from
operating and investing activities:
Net increase in net assets resulting from operations $ 19,115,510 $ 44,164,904
------------ ------------
Increase in investments (7,243,564) (36,315,958)
(Increase) decrease in interest and dividends receivable, net 746,166 (770,988)
Decrease in receivable for investments sold 507,952 930,160
Increase (decrease) in payable for investments purchased (3,967,380) 4,315,505
Increase in management fee payable 13,899 106,237
Increase (decrease) in accrued expenses (5,593) 17,043
Increase in accrued taxes 4,226,060 1,984,882
------------ ------------
Total adjustments to net assets from operations (5,722,460) (29,733,119)
------------ ------------
Net cash provided by operating and investing activities $ 13,393,050 $ 14,431,785
============ ============
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
6
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS MassMutual Corporate Investors
- --------------------------------------------------------------------------------
For the years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
------------- ------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 11,275,280 $ 11,177,651
Net realized gain on investments 15,449,627 8,353,752
Net change in unrealized appreciation of investments (7,609,397) 24,633,501
------------ ------------
Net increase in net assets resulting from operations 19,115,510 44,164,904
Dividends to shareholders from:
Net investment income (1996 - $2.70 per share; 1995 - $2.63 per share) (11,481,044) (11,180,747)
Net realized gains on investments (1996 - $.92 per share; 1995 - $1.09 per share) (3,928,297) (4,654,266)
------------ ------------
Total increase 3,706,169 28,329,891
Net Assets, beginning of year 168,563,044 140,233,153
------------ ------------
Net Assets, end of year (including undistributed net investment income
in 1996 - $17,789; 1995 - $223,553) $172,269,213 $168,563,044
============ ============
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
7
<PAGE>
SELECTED PER SHARE DATA MASSMUTUAL CORPORATE INVESTORS
Selected data for each common share outstanding for the years ended:
<TABLE>
<CAPTION>
For the years ended December 31,
------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value:
Beginning of year $ 39.60 $ 32.94 $ 34.93 $ 30.76 $ 28.74 $ 26.73 $ 29.47 $ 30.29 $ 31.16 $ 34.77
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net investment income 2.65 2.63 2.33 2.16 2.23 2.79 2.69 2.77 3.09 3.00
Net realized and
unrealized gain (loss)
on investments 1.84 7.75 (1.52) 4.81 2.59 2.02 (2.63) (.29) (.14) (2.01)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total from investment
operations 4.49 10.38 .81 6.97 4.82 4.81 .06 2.48 2.95 .99
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Dividends from net
investment income to
common shareholders (2.70) (2.63) (2.32) (2.16) (2.24) (2.80) (2.64) (2.77) (3.11) (4.31)
Distributions from net
realized gain on
investments to common
shareholders (.92) (1.09) (.48) (.64) (.56) -- (.16) (.53) (.71) (.29)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total distributions (3.62) (3.72) (2.80) (2.80) (2.80) (2.80) (2.80) (3.30) (3.82) (4.60)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net asset value:
End of year $ 40.47 $ 39.60 $ 32.94 $ 34.93 $ 30.76 $ 28.74 $ 26.73 $ 29.47 $ 30.29 $ 31.16
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Per share market value:
End of year $ 38.50 $ 35.75 $ 31.13 $ 29.75 $ 26.13 $ 28.00 $ 21.25 $ 25.13 $ 33.00 $ 38.50
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Total investment return:
Market value 22.44% 29.19% 14.03% 24.84% 3.18% 45.83% (4.15)% (14.54)% (2.92)% 4.76%
Net asset value 15.42% 33.76% 2.36% 23.41% 17.36% 18.27% .42% 8.93% 10.20% 4.44%
Net assets (in millions):
End of year $172.27 $168.56 $140.20 $148.70 $131.00 $122.30 $113.80 $125.40 $127.80 $129.50
Ratio of operating
expenses to average
net assets 1.70% 1.78% 1.76% 1.63% 1.27% 1.44% 1.51% 1.33% 1.31% .97%
Ratio of interest expense
to average net assets .61% .67% .72% 1.30% 1.42% 1.33% 1.39% 1.37% 1.12% .98%
Ratio of total expenses
to average net assets 2.31% 2.45% 2.48% 2.93% 2.69% 2.77% 2.90% 2.70% 2.43% 1.95%
Ratio of net investment
income to average net
assets 6.44% 7.09% 6.75% 6.61% 7.44% 9.70% 9.33% 8.90% 9.87% 8.77%
Portfolio turnover 64.89% 66.90% 46.88% 76.01% 60.59% 45.96% 23.74% 20.00% 28.18% 39.95%
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
8
<PAGE>
SCHEDULE OF INVESTMENTS MASSMUTUAL CORPORATE INVESTORS
December 31, 1996
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Principal Acquisition at Acquisition Cost at 12/31/96
Corporate Restricted Securities - 74.75%: (A) Amount Date Date (Note 2B) (Note 2A)
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
AccTech, LLC
A designer and marketer of specialized cleaning
products.
Senior Secured Floating Rate Revolving Credit
Note due 2002 $ 458,495 10/31/96 $ 458,495 $ 458,495 $ 449,279
Senior Secured Series A Floating Rate Note
due 2002 $ 790,000 10/31/96 778,150 790,000 778,782
10.1% Senior Secured Series A Note
due 2002 $ 1,185,000 10/31/96 1,154,664 1,185,000 1,164,381
12% Senior Secured Series B Note
due 2004 $ 1,098,000 10/31/96 1,155,206 989,465 1,167,943
Membership Interest 5 int. 10/31/96 264,080 332,000 264,080
Warrant, exercisable until 2004, to purchase 2
Membership Interests at $.01 per interest (B) 2 int. 10/31/96 -- 109,800 --
-------------- -------------- --------------
3,810,595 3,864,760 3,824,465
-------------- -------------- --------------
American Exploration Company - A.S.E.
An independent oil and gas company engaged
principally in the acquisition, development and
management of oil and gas properties.
11% Senior Subordinated Note due 2004 $ 3,000,000 12/27/91 2,964,600 2,961,288 2,925,000
Warrant, exercisable until 2004, to purchase
103,342 shares of common stock at $15.53
per share (B) 103,342 shs. 12/27/91 49,714 38,712 192,526
-------------- -------------- --------------
3,014,314 3,000,000 3,117,526
-------------- -------------- --------------
Ammirati & Puris, Inc.
An advertising agency that specializes in
representing a limited number of large and
high quality clients.
14% Senior Secured Note due 1998 $ 1,166,667 11/23/93 1,142,867 1,166,667 1,265,134
-------------- -------------- --------------
BP Prudhoe Bay Royalty Trust - N.Y.S.E.
A trust which shares in the production of
petroleum from the Alaskan North Slope.
26,180 Units of Beneficial Interest 26,180 uts. 2/28/89 654,500 405,011 445,060
-------------- -------------- --------------
C&K Manufacturing and Sales Company
A manufacturer and distributor of branded
packaging and supply products.
Senior Secured Floating Rate Revolving
Credit Facility due 2002 $ 319,200 8/29/96 789,940 319,200 316,168
Senior Secured Series A Floating Rate
Term Note due 2002 $ 2,463,059 8/29/96 2,436,703 2,463,059 2,438,427
12% Series B Term Note due 2004 $ 533,000 8/29/96 524,739 506,997 535,079
Membership Interest 266 int. 8/29/96 212,800 263,000 212,800
Warrant, exercisable until 2004, to purchase 73
Membership Interests at $.01 per interest (B) 73 int. 8/29/96 1 26,650 1
-------------- -------------- --------------
3,964,183 3,578,906 3,502,475
-------------- -------------- --------------
</TABLE>
- --------------------------------------------------------------------------------
9
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED)
December 31, 1996
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Principal Acquisition at Acquisition Cost at 12/31/96
Corporate Restricted Securities: (A) (Continued) Amount Date Date (Note 2B) (Note 2A)
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Cains Foods, L.P.
A producer of mayonnaise, sauce and pickle
products for both the retail and food
service markets.
Senior Secured Floating Rate Revolving
Credit Note due 2000 $ 259,459 9/30/96 $ 259,459 $ 259,459 $ 259,459
10% Senior Secured Term Note due 2004 $ 1,513,512 9/29/95 1,513,512 1,513,512 1,499,588
11.5% Senior Subordinated Note due 2004 $ 945,945 9/29/95 895,706 900,797 939,702
8% Junior Subordinated Convertible Note
due 2004, convertible into 78 partnership
points at $1,388.89 per point $ 108,108 9/29/95 108,108 108,108 208,606
Warrant, exercisable until 2006, to purchase
39 partnership points at $.01 per point (B) 39 pts. 9/29/95 50,261 50,261 97,787
-------------- -------------- --------------
2,827,046 2,832,137 3,005,142
-------------- -------------- --------------
Catalina Lighting, Inc. - N.Y.S.E.
A designer, importer and distributor of residential
and office lighting fixtures.
8% Convertible Subordinated Note due 2002,
convertible into 200,000 shares of common
stock at $7.50 per share $ 1,500,000 3/31/94 1,420,050 1,500,000 1,424,588
-------------- -------------- --------------
Classic Sports, Inc.
A cable sports television network.
Convertible Preferred Stock, convertible
into 644 shares of common stock at $1,000
per share 644 shs. * 544,444 304,121 773,333
-------------- -------------- --------------
The Coast Distribution System - A.S.E.
A wholesale distributor of recreational vehicle
and marine parts and accessories.
11.2% Senior Subordinated Secured Note
due 1999 $ 350,050 6/26/89 361,217 350,050 353,446
Common Stock (B) 108,646 shs. 6/27/85 560,613 568,101 374,150
-------------- -------------- --------------
921,830 918,151 727,596
-------------- -------------- --------------
CompuCom Systems, Inc. - O.T.C.
A personal computer dealer specializing in
serving corporate accounts.
Common Stock (B) 416,720 shs. 9/24/92 907,616 916,784 4,255,753
-------------- -------------- --------------
Consumer Product Enterprises, Inc.
A manufacturer of colored acrylic felt for
consumer use.
Senior Secured Floating Rate Revolving
Credit Note due 2000 $ 169,180 12/8/95 169,180 169,180 169,180
10.75% Senior Secured Term Note due 2003 $ 1,214,205 12/8/95 1,226,772 1,214,205 1,202,913
12% Senior Subordinated Note due 2005 $ 800,575 12/8/95 803,858 758,920 777,678
Common Stock (B) 184,560 shs. 12/8/95 138,420 184,560 138,420
Warrant, exercisable until 2005, to purchase
138,420 shares of common stock at $.01
per share (B) 138,420 shs. 12/8/95 1,384 50,853 1,384
-------------- -------------- --------------
2,339,614 2,377,718 2,289,575
-------------- -------------- --------------
</TABLE>
*4/18/95 and 6/3/96.
- --------------------------------------------------------------------------------
10
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
December 31, 1996
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Principal Acquisition at Acquisition Cost at 12/31/96
Corporate Restricted Securities: (A) (Continued) Amount Date Date (Note 2B) (Note 2A)
------------- ----------- -------------- --------- -----------
<S> <C> <C> <C> <C> <C>
Control Devices, Inc. - O.T.C.
A producer of high quality electromechanical
circuit protector devices and photo-optic sensors.
Common Stock (B) 174,200 shs. * $ 26,242 $ 26,242 $ 2,038,144
------------ ------------ ------------
Corrections Corporation of America - O.T.C.
An operator of private prisons and
correctional facilities for federal,
state and local governments.
11.08% Senior Secured Note due 2000 $ 383,495 12/11/90 388,271 383,016 403,360
------------ ------------ ------------
D&K Wholesale Drug, Inc. - O.T.C.
A wholesale pharmaceutical distribution company.
11% Subordinated Note due 1997 $ 541,667 12/29/87 495,842 541,667 542,750
11% Convertible Subordinated Note due 1997,
convertible into 265,490 shares of common
stock at $3.30 per share $ 875,000 12/29/87 956,113 875,000 876,750
------------ ------------ ------------
1,451,955 1,416,667 1,419,500
------------ ------------ ------------
Delta Beverage Group, Inc.
A Pepsi soft drink bottler.
Common Stock (B) 966 shs. 3/8/88 181,486 2,006,380 181,486
------------ ------------ ------------
Diversco, Inc.
A contract provider of janitorial and equipment
maintenance services and temporary production
labor to industrial customers.
Senior Floating Rate Revolving Credit
Facility due 2002 $ 454,000 10/24/96 451,479 454,000 450,323
Senior Floating Rate Note due 2002 $ 454,250 10/24/96 450,232 454,250 451,615
10.16% Senior Term Note due 2002 $ 1,362,750 10/24/96 1,364,385 1,362,750 1,374,197
12% Senior Subordinated Note due 2003 $ 1,249,000 10/24/96 1,277,852 1,104,080 1,293,340
Membership Interest 2,992 int. 10/24/96 224,393 305,190 224,393
Warrant, exercisable until 2003, to purchase
1,791 Membership Interest at $.01 per
interest (B) 1,791 int. 10/24/96 18 147,609 18
------------ ------------ ------------
3,768,359 3,827,879 3,793,886
------------ ------------ ------------
Elgin National Industries, Inc.
An operator in the specialty fastener, mineral
processing equipment, engineering, construction
and electrical distribution industries.
13% Senior Subordinated Note due 2001 $ 2,000,000 9/24/93 1,943,216 1,983,216 2,025,400
10% Preferred Stock 2,339 shs. 9/24/93 176,964 233,925 189,666
Common Stock (B) 161 shs. 9/24/93 16,075 16,075 121
Warrant, exercisable from 1998 until 2001,
to purchase 168 shares of common stock at
$.01 per share (B) 168 shs. 9/24/93 17 16,782 17
------------ ------------ ------------
2,136,272 2,249,998 2,215,204
------------ ------------ ------------
Exide Electronics Group, Inc. - O.T.C.
A manufacturer and servicer of uninterruptible
power systems.
Common Stock (B) 229,358 shs. 9/2/92 2,972,400 3,000,000 3,213,876
------------ ------------ ------------
Fay's, Inc. - N.Y.S.E.
An operator of a discount drug store chain.
10% Convertible Senior Note due 1998,
convertible into 95,566 shares of common
stock at $5.23 per share $ 500,000 1/31/83 485,800 500,000 997,700
------------ ------------ ------------
</TABLE>
*7/29/94 and 10/8/96.
- --------------------------------------------------------------------------------
11
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
December 31, 1996
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Principal Acquisition at Acquisition Cost at 12/31/96
Corporate Restricted Securities: (A) (Continued) Amount Date Date (Note 2B) (Note 2A)
-------------- ----------- -------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Fleming Acquisition Corporation
A supplier of high-quality, premium printed
labels for distilled spirits, wine, food and
household products.
15% Senior Subordinated Note due 2005 $ 2,749,352 * $ 2,717,185 $ 2,602,884 $ 2,802,965
Common Stock (B) 545 shs. 4/28/95 141,111 272,500 12,467
Warrant, exercisable until 2005, to
purchase 380 shares of common stock
at $.01 per share (B) 380 shs. 4/28/95 98,235 170,455 8,684
Incentive Warrant, exercisable from 1998
until 2000, to purchase 19 shares of common
stock at $.01 per share (B) 19 shs. 4/28/95 3,308 2,273 439
------------ ------------ ------------
2,959,839 3,048,112 2,824,555
------------ ------------ ------------
Hardy Oil & Gas USA, Inc.
Engages in the exploration and development of
oil and gas reserves.
8.46% Guaranteed Senior Note due 2004 $ 3,000,000 1/11/95 2,904,300 3,000,000 3,027,300
Warrant, exercisable until 2004, to purchase
272,490 shares of common stock at (Pounds)1.53
per share (B) 272,490 shs. 1/11/95 27,000 -- 407,046
------------ ------------ ------------
2,931,300 3,000,000 3,434,346
------------ ------------ ------------
Hein-Werner Corp. - A.S.E.
A manufacturer of automotive service and collision
repair equipment and hydraulic cylinders.
8% Convertible Subordinated Note due 1999,
convertible into 179,140 shares of common
stock at $6.28 per share $ 1,125,000 9/29/89 1,094,738 1,125,000 1,126,238
Warrant, exercisable until 1999, to purchase
59,713 shares of common stock at $6.28
per share (B) 59,713 shs. 9/3/96 -- -- 16,481
------------ ------------ ------------
1,094,738 1,125,000 1,142,719
------------ ------------ ------------
Highland Homes Holdings, Inc.
A single family homebuilder operating in the
Dallas-Fort Worth and Atlanta areas.
10.75% Senior Note due 1999 $ 2,250,000 11/18/93 2,227,725 2,219,324 2,271,375
Warrant, exercisable until 2001, to purchase
21 shares of common stock at $17,897.31
per share (B) 21 shs. 11/18/93 2 40,902 209
------------ ------------ ------------
2,227,727 2,260,226 2,271,584
------------ ------------ ------------
Hudson River Capital
(formerly Victory Capital LLC)
Acquires controlling or substantial interests in
manufacturing and marketing entities.
3% Convertible Preferred Stock, convertible
into 100,000 shares of common stock at $10
per share (B) 100,000 shs. 7/21/94 950,000 1,000,000 950,000
----------- ------------ ------------
</TABLE>
*4/28/95, 8/1/95, 11/1/95 and 5/1/96.
- --------------------------------------------------------------------------------
12
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
December 31, 1996
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Principal Acquisition at Acquisition Cost at 12/31/96
Corporate Restricted Securities: (A) (Continued) Amount Date Date (Note 2B) (Note 2A)
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Hussey Seating Company
A manufacturer of spectator seating products.
Senior Secured Floating Rate Revolving Note
due 2003 $ 675,000 6/12/96 $ 668,385 $ 675,000 $ 668,858
Senior Secured Floating Rate Note due 2003 $ 900,000 6/12/96 891,090 900,000 892,170
10% Senior Secured Note due 2003 $ 900,000 6/12/96 876,240 900,000 891,720
12% Subordinated Secured Note due 2006 $ 1,350,000 6/12/96 1,327,320 1,132,443 1,369,170
Warrant, exercisable until 2006, to purchase
3,553 shares of common stock at $.01 per
share (B) 3,553 shs. 6/12/96 36 225,000 36
-------------- -------------- --------------
3,763,071 3,832,443 3,821,954
-------------- -------------- --------------
Intermetrics, Inc.
A provider of software systems, services and
products to a variety of information technology
users.
Senior Floating Rate Revolving Term Note
due 2002 $ 1,332,143 8/31/95 1,320,881 1,332,143 1,298,840
13% Senior Subordinated Note due 2002 $ 799,318 8/31/95 813,520 707,532 797,480
Common Stock (B) 11,075 shs. 8/31/95 51,961 69,221 51,914
Warrant, exercisable until 2007, to purchase
21,176 shares of Class D common stock at
$.01 per share (B) 21,176 shs. 8/31/95 2,118 104,000 2,118
-------------- -------------- --------------
2,188,480 2,212,896 2,150,352
-------------- -------------- --------------
Jackson Products, Inc.
Manufactures and distributes a variety of
industrial and highway safety products.
12.25% Senior Subordinated Note due 2004 $ 1,971,000 8/16/95 1,971,000 1,933,433 1,981,643
13.25% Cumulative Exchangeable Preferred
Stock 99 shs. 8/16/95 985,500 823,332 827,943
Common Stock (B) 434 shs. 8/16/95 43,426 43,426 43,426
Warrant, exercisable until 2005, to purchase
1,999 shares of common stock at $.01
per share (B) 1,999 shs. 8/16/95 199,735 199,735 1,999
-------------- -------------- --------------
3,199,661 2,999,926 2,855,011
-------------- -------------- --------------
Kappler Safety Group, Inc.
A manufacturer of protective apparel for the
industrial/safety, cleanroom and healthcare
markets.
13% Senior Subordinated Note due 2004 $ 3,333,000 12/2/96 3,383,995 3,002,765 3,347,999
Warrant, exercisable until 2004, to purchase
57,418 shares of common stock at $.01
per share (B) 57,418 shs. 12/2/96 57,418 333,300 57,418
-------------- -------------- --------------
3,441,413 3,336,065 3,405,417
-------------- -------------- --------------
Kuhlman Corporation - N.Y.S.E.
A manufacturer of non-automotive engine
components.
Warrant, exercisable until 2002, to purchase
100,000 shares of common stock at $8.32
per share (B) 100,000 shs. 4/30/92 106,000 162,000 901,780
-------------- -------------- --------------
</TABLE>
- --------------------------------------------------------------------------------
13
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
December 31, 1996
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Principal Acquisition at Acquisition Cost at 12/31/96
Corporate Restricted Securities: (A) (Continued) Amount Date Date (Note 2B) (Note 2A)
------------- ----------- -------------- --------- -----------
<S> <C> <C> <C> <C> <C>
Latin Communications Group
An operator of Spanish-language media in
North America.
Senior Secured Floating Rate Revolving
Note due 2002 $ 575,000 * $ 575,000 $ 575,000 $ 571,723
10.4% Senior Secured Note due 2001 $ 1,750,000 2/14/95 1,752,275 1,750,000 1,793,400
Common Stock (B) 88,438 shs. ** 628,945 812,504 884,380
---------- ---------- ----------
2,956,220 3,137,504 3,249,503
---------- ---------- ----------
Maloney Industries, Inc.
Engineers and manufactures process systems for
the oil and gas industry.
13% Subordinated Note due 2004 $ 2,025,000 10/26/95 2,378,250 2,025,000 2,229,120
Limited Partnership Interest 568 uts. 10/20/95 506,250 733,259 506,250
Warrant, exercisable until 2004, to purchase
297 units of Limited Partnership Interest at
$.01 per unit (B) 297 uts. 10/26/95 297 -- 297
---------- ---------- ----------
2,884,797 2,758,259 2,735,667
---------- ---------- ----------
Maxtec International Corp.
A manufacturer and distributor of precision
test and measurement equipment and overhead
crane control systems.
Senior Floating Rate Revolving Credit
Facility due 2001 $ 659,341 6/28/95 659,341 659,341 653,209
Senior Secured Floating Rate Note due 2001 $ 222,066 6/28/95 219,845 222,066 221,666
12.5% Subordinated Secured Note due 2003 $ 160,352 6/28/95 163,704 123,550 162,165
Common Stock (B) 76,923 shs. 6/28/95 192,115 230,769 173,077
Warrant, exercisable from 1998 until 2005,
to purchase 39,563 shares of common stock
at $.01 per share (B) 39,563 shs. 6/28/95 98,581 171,429 39,563
---------- ---------- ----------
1,333,586 1,407,155 1,249,680
---------- ---------- ----------
Mercury Computer Systems, Inc.
A designer, manufacturer and marketer of
computer systems.
Common Stock (B) 500,000 shs. 12/21/87 1,487,700 1,500,000 1,512,000
---------- ---------- ----------
Monro Muffler Brake, Inc. - O.T.C.
An operator of retail muffler and brake shops.
Common Stock 39,406 shs. 4/19/85 62,717 51,210 576,317
---------- ---------- ----------
NM Holdings LLC
A company created to acquire motion picture
film rights from Twentieth Century Fox.
10% Senior Note due 2001 $ 1,000,000 6/28/96 980,600 1,000,000 990,100
12% Subordinated Note due 2001 $ 980,000 6/28/96 982,156 980,000 990,780
Membership Interest 20,000 int.6/28/96 15,000 19,876 15,000
---------- ---------- ----------
1,977,756 1,999,876 1,995,880
---------- ---------- ----------
Nu Horizons Electronics Corp. - O.T.C.
A distributor of high technology active and
passive electronic devices.
8.25% Convertible Subordinated Note due
2002, convertible into 156,867 shares of
common stock at $9 per share $ 1,411,800 8/31/94 1,425,918 1,411,800 1,486,837
---------- ---------- ----------
</TABLE>
*7/13/95 and 12/1/95.
**12/1/95, 2/27/96 and 8/5/96.
- --------------------------------------------------------------------------------
14
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
December 31, 1996
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Principal Acquisition at Acquisition Cost at 12/31/96
Corporate Restricted Securities: (A) (Continued) Amount Date Date (Note 2B) (Note 2A)
------------- ----------- -------------- --------- -----------
<S> <C> <C> <C> <C> <C>
PanEnergy Corporation - N.Y.S.E.
An owner and operator of natural gas gathering,
transmission and processing facilities.
9% Convertible Subordinated Note due 2004,
convertible into 135,563 shares of common
stock at $22.13 per share $ 3,000,000 12/30/92 $ 2,934,000 $ 3,000,000 $ 5,490,285
------------ ------------ ------------
PAR Acquisition Corp.
A manufacturer of fuel handling systems for
nuclear power plants and hazardous waste.
14.5% Senior Subordinated Note due 2000 $ 833,333 2/5/93 832,000 833,333 858,000
8% Convertible Preferred Stock due 2001,
convertible into 83,333 shares of common
stock at $2 per share 83,333 shs. 2/5/93 166,667 166,667 152,075
Common Stock (B) 133,333 shs. 2/5/93 333,333 333,333 160,000
------------ ------------ ------------
1,332,000 1,333,333 1,170,075
------------ ------------ ------------
Pharmaceutical Buyers, Inc.
A group purchasing organization which specializes
in arranging and negotiating contracts for the
purchase of pharmaceutical goods and medical
equipment.
10.5% Senior Secured Note due 2005 $ 967,500 11/30/95 1,008,232 967,500 983,561
10.5% Senior Secured Convertible Note
due 2005, convertible into 4 shares of
common stock at $50,000 per share $ 195,000 11/30/95 205,355 195,000 209,255
Common Stock (B) 7 shs. 11/30/95 253,125 337,500 253,125
------------ ------------ ------------
1,466,712 1,500,000 1,445,941
------------ ------------ ------------
Piedmont Holding, Inc.
A general aviation fixed based operator with
repair, maintenance and overhaul certification.
12% Senior Subordinated Note due 2001 $ 2,714,283 7/15/92 2,736,540 2,714,283 2,810,369
Senior Redeemable Cumulative Preferred Stock 281,939 shs. 7/15/92 281,939 281,939 281,939
Common Stock (B) 3,771 shs. 7/15/92 2,564 3,771 84,621
Warrant, exercisable until 2001, to purchase
5,042 shares of common stock at $.05
per share (B) 5,042 shs. 7/15/92 3,227 -- 112,941
------------ ------------ ------------
3,024,270 2,999,993 3,289,870
------------ ------------ ------------
Plastipak Packaging, Inc.
A manufacturer of plastic containers.
10.64% Senior Subordinated Note due 2006 $ 3,500,000 10/25/96 3,403,750 3,407,927 3,447,850
Warrant, exercisable until 2006, to purchase
97 shares of common stock at $.01 per
share (B) 97 shs. 10/25/96 55,593 93,625 55,593
------------ ------------ ------------
3,459,343 3,501,552 3,503,443
------------ ------------ ------------
Precision Dynamics, Inc.
A manufacturer of custom-designed solenoid
valves and controls.
Senior Secured Floating Rate Revolving
Credit Facility due 2003 $ 358,600 7/22/96 355,050 358,600 355,193
Senior Secured Floating Rate Term Note
due 2003 $ 2,935,000 7/22/96 2,906,237 2,935,000 2,908,585
12% Senior Secured Term Note due 2004 $ 489,000 7/22/96 482,545 394,179 491,543
8% Preferred Stock 232 shs. 7/22/96 220,231 231,822 220,324
Common Stock (B) 599 shs. 7/22/96 21,699 28,978 21,699
Warrant, exercisable until 2004 to purchase 322
shares of common stock at $.01 per share (B) 322 shs. 7/22/96 3 97,800 3
------------ ------------ ------------
3,985,765 4,046,379 3,997,347
------------ ------------ ------------
</TABLE>
- --------------------------------------------------------------------------------
15
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
December 31, 1996
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Principal Acquisition at Acquisition Cost at 12/31/96
Corporate Restricted Securities: (A) (Continued) Amount Date Date (Note 2B) (Note 2A)
------------- ----------- -------------- --------- -----------
<S> <C> <C> <C> <C> <C>
Protein Genetics, Inc.
A producer of bovine artificial insemination
products, related breeding and healthcare
products and specialty genetics sold to the
dairy and beef industries.
11.67% Senior Secured Note due 2004 $ 1,200,000 8/12/94 $ 1,184,160 $ 1,200,000 $ 975,720
11.51% Junior Secured Note due 1999 $ 800,000 8/12/94 783,040 800,000 613,920
9.8% Redeemable Exchangeable
Preferred Stock 10,000 shs. 8/12/94 847,900 1,000,000 378,500
Common Stock (B) 1,492 shs. 8/12/94 15 -- 11
------------ ------------ ------------
2,815,115 3,000,000 1,968,151
------------ ------------ ------------
RailTex, Inc. - O.T.C.
An operator of short-line railroads in the Midwest,
West and Canada.
12% Senior Subordinated Note due 2002 $ 1,500,000 2/16/93 1,599,150 1,500,000 1,702,200
Common Stock (B) 71,000 shs. 2/16/93 681,600 681,600 1,703,113
------------ ------------ ------------
2,280,750 2,181,600 3,405,313
------------ ------------ ------------
Rent-Way, Inc. - O.T.C.
Operates rent-to-own stores in Ohio,
Pennsylvania and New York.
10% Convertible Subordinated Note due 2002,
convertible into 201,207 shares of common
stock at $9.94 per share $ 2,000,000 7/18/95 1,991,220 2,000,000 2,138,010
Warrant, exercisable until 2002, to purchase
20,000 shares of common stock at $9.94
per share (B) 20,000 shs. 7/18/95 200 -- 2,660
------------ ------------ ------------
1,991,420 2,000,000 2,140,670
------------ ------------ ------------
Sequentia, Inc.
A manufacturer and distributor of fiberglass
reinforced panels used in commercial, industrial
and residential applications.
12% Subordinated Note due 2004 $ 2,281,400 12/14/95 2,418,284 1,836,179 1,140,700
Limited Partnership Interest of KS Holdings, L.P. 7,186 uts. 12/14/95 538,950 678,741 71,860
Warrant, exercisable until 2004, to purchase
5,449 units of Limited Partnership Interest of
KS Holdings, L.P. at $.01 per unit (B) 5,449 uts. 12/14/95 5,449 479,094 2,725
------------ ------------ ------------
2,962,683 2,994,014 1,215,285
------------ ------------ ------------
Star International Holdings, Inc.
A manufacturer of commercial cooking appliances.
9.65% Senior Secured Note due 2004 $ 1,655,672 5/27/94 1,675,010 1,665,672 1,652,346
10.5% Subordinated Note due 2004 $ 716,418 5/27/94 716,418 716,418 690,914
Common Stock (B) 4,310 shs. 5/27/94 259,735 259,735 45,096
Warrant, exercisable until 2004, to purchase
3,224 shares of common stock at $.01
per share (B) 3,224 shs. 5/27/94 32 -- 33,707
------------ ------------ ------------
2,651,195 2,641,825 2,422,063
------------ ------------ ------------
Summey Outdoor Advertising, Inc.
An operator of an outdoor advertising business
in North Carolina and South Carolina.
12% Senior Note (with contingent interest)
due 1995 (B) $ 937,500 12/13/83 886,500 937,500 234,375
10.25% Senior Note due 1999 (B) $ 743,750 9/30/87 669,003 743,750 185,938
10.25% Convertible Senior Note due 1999,
convertible into 4% of the Company (B) $ 50,000 9/30/87 48,795 50,000 12,500
------------ ------------ ------------
1,604,298 1,731,250 432,813
------------ ------------ ------------
</TABLE>
- --------------------------------------------------------------------------------
16
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED)
December 31, 1996
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Principal Acquisition at Acquisition Cost at 12/31/96
Corporate Restricted Securities: (A) (Continued) Amount Date Date (Note 2B) (Note 2A)
------------- ----------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Supreme Industries, Inc. - A.S.E.
A manufacturer of modular homes and truck bodies.
Common Stock (B) 536,049 shs. * $ 1,226,108 $ 1,279,976 $ 2,743,901
Common Stock of Contempri Homes, Inc. (B) 229,925 shs. 12/31/92 7,040 4,952 21,555
Common Stock of TGC Industries, Inc. (B) 19,082 shs. 9/30/86 9,497 9,497 27,728
-------------- ------------- -------------
1,242,645 1,294,425 2,793,184
-------------- ------------- -------------
Team Rental Group, Inc.
An operator of Budget Rent-A-Car franchises,
retail used car sales facilities, and van
pool territories.
7% Convertible Subordinated Note due 2003,
convertible into 99,226 shares of common
stock at $20.16 per share $ 2,000,000 12/18/96 1,798,440 2,000,000 1,803,270
-------------- ------------- -------------
Telex Communications, Inc.
A producer of electronic and communications
products.
Warrant, exercisable until 2004, to purchase
9,239 shares of common stock at $.01 per share (B) 9,239 shs. 5/30/89 92 9 116,759
-------------- ------------- -------------
Tidewater Holdings, Inc.
An operator of a barge transportation line on
the Columbia/Snake River system.
12.5% Senior Subordinated Note due 2006 $ 2,380,000 7/25/96 2,388,092 2,334,464 2,441,404
Convertible Preferred Stock, convertible into
1,120 shares of common stock at $1,000 per
share (B) 1,120 shs. 7/25/96 1,008,000 1,120,000 1,008,000
Warrant, exercisable until 2008, to purchase
474 shares of common stock at $.01 per
share (B) 474 shs. 7/25/96 43 48,216 43
-------------- ------------- -------------
3,396,135 3,502,680 3,449,447
-------------- ------------- -------------
TransMontaigne Oil Company - A.S.E.
An independent petroleum products marketing
company.
12.75% Senior Subordinated Debenture
due 2000 $ 1,200,000 3/28/91 1,274,280 1,177,986 1,253,040
Common Stock (B) 258,720 shs. ** 400,000 798,595 2,095,632
Warrant, exercisable until 2001, to purchase
74,606 shares of common stock at $3.60
per share (B) 74,606 shs. 3/28/91 7,461 42,000 443,160
-------------- ------------- -------------
1,681,741 2,018,581 3,791,832
-------------- ------------- -------------
Unidata, Inc.
A manufacturer and distributor of database
management software
11.5% Senior Subordinated Note due 2003 $ 2,500,000 12/14/95 2,538,500 2,393,146 2,318,000
Common Stock (B) 125,000 shs. 12/14/95 375,000 500,000 375,000
Warrant, exercisable from 1997 until 2003,
to purchase 62,500 shares of common stock
at $1 per share (B) 62,500 shs. 12/14/95 625 124,250 625
-------------- ------------- -------------
2,914,125 3,017,396 2,693,625
-------------- ------------- -------------
</TABLE>
*5/23/79, 12/15/95 and 6/9/96.
**3/28/91, 12/18/91, 9/30/92, 9/30/93, 9/30/94, 3/31/95 and 5/9/95.
- --------------------------------------------------------------------------------
17
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
December 31, 1996
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Principal Acquisition at Acquisition Cost at 12/31/96
Corporate Restricted Securities: (A) (Continued) Amount Date Date (Note 2B) (Note 2A)
------------- ----------- -------------- --------- -----------
<S> <C> <C> <C> <C> <C>
Unipac Corporation
A manufacturer of laminated materials which are
used to seal a variety of packaging containers.
Senior Secured Floating Rate Note due 2002 $ 956,484 2/9/96 $ 956,484 $ 956,484 $ 972,745
12% Senior Secured Note due 2004 $ 243,750 2/9/96 246,870 219,588 248,649
Acquisition Line of Credit due 2002 $ 750,000 9/30/96 750,000 750,000 763,200
Limited Partnership Interest of Riverside II
Holding Company L.P. 123 uts. * 112,737 217,232 102,118
Warrant, exercisable from 2000 until 2004,
to purchase 41 units of Limited Partnership
Interest of Riverside II Holding Company L.P.
at $.01 per unit (B) 41 uts. 2/9/96 4 40,313 4
------------ ------------ ------------
2,066,095 2,183,617 2,086,716
------------ ------------ ------------
U.S. Netting, Inc.
A manufacturer of plastic netting for a
wide variety of industries.
11% Senior Secured Note due 2005 $ 1,676,700 5/3/95 1,854,095 1,676,700 1,800,608
12% Subordinated Note due 2005 $ 652,050 5/3/95 733,622 619,436 713,669
Common Stock (B) 4,911 shs. 5/3/95 162,652 391,230 4,911
Warrant, exercisable until 2005, to purchase
2,795 shares of common stock at $.01
per share (B) 2,795 shs. 5/3/95 92,549 35,923 2,795
------------ ------------ ------------
2,842,918 2,723,289 2,521,983
------------ ------------ ------------
U.S. Silica Company
A producer of high grade industrial and specialty
ground silica sands in North America.
15% Senior Subordinated Note due 2005 $ 2,333,300 12/19/96 2,490,098 2,333,171 2,486,131
Convertible Preferred Stock, convertible into
42,001 shares of common stock at $27.78
per share (B) 42,001 shs. 12/19/96 875,025 1,166,700 875,025
Warrant, exercisable until 2005, to purchase
6,481 units of Series A Preferred Stock and
12,964 units of Series B Preferred Stock at $.01
per unit (B) 6,481 uts. 12/19/96 12,963 129 12,963
------------ ------------ ------------
3,378,086 3,500,000 3,374,119
------------ ------------ ------------
Wright & Lato, Inc.
A manufacturer of gold wedding bands and rings.
16% Subordinated Note due 1997 $ 138,250 12/6/83 125,737 138,250 136,978
14% Convertible Subordinated Note due
1997, convertible into 15,000 shares of
common stock at $4.28 per share $ 64,250 12/6/83 63,363 64,250 63,363
------------ ------------ ------------
189,100 202,500 200,341
------------ ------------ ------------
Sub-Total Corporate Restricted Securities $117,965,695 120,889,352 128,769,937
============ ============ ============
</TABLE>
*2/9/96 and 9/25/96
- --------------------------------------------------------------------------------
18
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
December 31, 1996
<TABLE>
<CAPTION>
Market Value
Interest Due Principal Cost at 12/31/96
Rule 144A Securities: (A) Rate Date Amount (Note 2B) (Note 2A)
--------- ------- --------- --------- ------------
<S> <C> <C> <C> <C> <C>
Convertible Bonds - 5.62%
Continental Airlines, Inc. 6.750% 4/15/06 $ 1,000,000 $ 928,250 $ 1,122,500
Continental Airlines, Inc. 9.500 12/15/01 750,000 750,000 761,250
Corporate Express, Inc. 4.500 7/1/00 570,000 526,350 532,950
Garnet Resources Corporation 9.500 12/21/98 500,000 500,000 200,000
Grand Metropolitan PLC 6.500 1/31/00 600,000 600,000 710,250
Home Shopping Network 5.880 3/1/06 1,000,000 1,000,000 1,080,000
Imax Corporation 5.750 4/1/03 750,000 731,250 676,875
Marriott International, Inc. 0.000 3/25/11 1,000,000 549,616 562,500
Molton Metal Technology 5.500 5/1/06 1,150,000 1,079,063 793,500
Occusystems, Inc. 6.000 12/15/01 800,000 800,000 868,000
Omnicom Group 4.250 1/5/07 275,000 275,000 280,500
Renal Treatment Centers, Inc. 5.625 7/15/06 475,000 475,000 460,750
The Sports Authority, Inc. 5.250 9/15/01 140,000 140,000 131,600
Sunglass Hut International, Inc. 5.250 6/15/03 725,000 673,231 522,000
Thermo Electron Corporation 4.250 1/1/03 250,000 250,000 297,500
Thermo Terratech, Inc. 4.625 5/1/03 90,000 90,000 82,800
United Waste Systems, Inc. 4.500 6/1/01 500,000 500,000 597,500
------------ ------------ ------------
Sub-Total Rule 144A Convertible Bonds 10,575,000 9,867,760 9,680,475
------------ ------------ ------------
Bonds - 1.61%
Gorges/Quick to Fix Food 11.500% 12/1/06 850,000 850,000 867,000
Parker Drilling Corporation 9.750 11/15/06 1,500,000 1,488,225 1,582,500
US Can Corporation 10.125 10/15/06 300,000 300,000 315,375
------------ ------------ ------------
Sub-Total Rule 144A Bonds $ 2,650,000 2,638,225 2,764,875
------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
Market Value
Cost at 12/31/96
Shares (Note 2B) (Note 2A)
------------ ------------ ------------
<S> <C> <C> <C>
Convertible Preferred Stock - 2.08%
Greenfield Capital Trust, Inc. 14,300 697,850 689,975
Loral Space and Communications LTD 3,600 180,000 203,400
SFX Broadcasting, Inc. 23,100 1,112,475 1,016,400
Time Warner, Inc. 1,572 1,500,000 1,682,040
----------- ----------- -----------
Sub-Total Rule 144A Convertible
Preferred Stock 3,490,325 3,591,815
----------- -----------
Total Rule 144A Securities 15,996,310 16,037,165
----------- -----------
Total Corporate Restricted Securities 136,885,662 144,807,102
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
Market Value
Interest Due Principal Cost at 12/31/96
Corporate Public Securities: Rate Date Amount (Note 2B) (Note 2A)
--------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Convertible Bonds - 5.84%
Hilton Hotels, Inc. 5.000 5/15/06 $ 1,385,000 1,385,000 1,430,013
Hollinger, Inc. 0.000 10/15/13 1,000,000 371,182 355,000
Home Depot, Inc. 3.250 10/1/01 900,000 887,000 886,500
Magna International, Inc. 5.000 10/15/02 600,000 613,125 684,000
Mascotech, Inc. 4.500 12/15/03 800,000 645,250 656,000
MEDIQ Incorporated 7.500 7/15/03 1,000,000 1,000,000 940,000
Republic of Italy 5.000 6/28/01 685,000 685,963 685,000
Savoy Pictures Entertainment, Inc. 7.000 7/1/03 1,250,000 1,287,500 975,000
Tenet Healthcare Corporation 6.000 12/1/05 850,000 850,000 896,750
Time Warner, Inc. 0.000 6/22/13 2,000,000 811,116 867,500
US Filter Corporation 4.500 12/15/01 1,000,000 1,000,000 1,017,500
United States Cellular Corporation 6.089 6/15/15 2,000,000 671,757 662,500
------------ ------------ ------------
Total Convertible Bonds $ 13,470,000 10,207,893 10,055,763
============ ============ ============
</TABLE>
- --------------------------------------------------------------------------------
19
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
December 31, 1996
<TABLE>
<CAPTION>
Warrants or Market Value
Interest Due Principal Cost at 12/31/96
Corporate Public Securities: (Continued) Rate Date Amount (Note 2B) (Note 2A)
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Bonds - 17.53%
Advanced Micro Devices 11.000% 8/1/03 $ 850,000 $ 850,000 $ 922,250
Atlas Air, Inc. 12.250 12/1/02 2,000,000 2,000,000 2,210,000
Cabot Safety Acquisition Corporation 12.500 7/15/05 1,000,000 1,000,000 1,105,000
Central Rents, Inc. 12.875 12/15/03 1,880,000 1,755,412 1,898,800
Clark Schwebel, Inc. 10.500 4/15/06 300,000 300,000 319,500
Consolidated Cigar Corporation 10.500 3/1/03 500,000 500,000 522,500
Crown Packaging Ltd. 10.750 11/1/00 750,000 750,000 682,500
Data Documents, Inc. 13.500 7/15/02 3,028,000 3,033,290 3,406,500
Decorative Homes Accents, Inc. 13.000 6/30/02 700,000 700,000 350,000
Doane Products Company 10.625 3/1/06 150,000 150,000 159,750
Florist Transworld Delivery, Inc. 14.000 12/15/01 1,175,000 1,141,556 1,116,250
Gray Communications Systems, Inc. 10.625 10/1/06 525,000 525,000 546,000
Greenwich Air Services, Inc. 10.500 6/1/06 1,500,000 1,500,000 1,597,500
Harman International Industries Incorporated 12.000 8/1/02 1,000,000 992,770 1,083,750
Hosiery Corporation of America 13.750 8/1/02 1,000,000 987,800 1,100,000
Indah Kiah International Corporation 11.875 6/15/02 1,000,000 1,000,000 1,070,000
International Wire Group, Inc. 11.750 6/1/05 750,000 750,000 806,250
Ivex Packaging Corporation 12.500 12/15/02 250,000 266,562 270,625
Jacor Communications Corporation 9.750 12/15/06 200,000 200,000 204,000
Key Plastics, Inc. 14.000 11/15/99 750,000 760,462 772,500
Northwest Airlines Corp. 12.091 12/31/00 840,284 871,795 907,507
Northwest Airlines Corp. 10.150 1/2/05 750,000 750,000 804,375
Remington Products Company 11.000 6/15/06 600,000 595,506 552,000
Telemundo Group, Inc. 7.000 2/15/06 1,250,000 1,147,068 1,203,125
Telex Communications, Inc. 12.000 7/15/04 1,500,000 1,500,000 1,650,000
Trans-Resources, Inc. 11.875 7/1/02 1,000,000 1,032,500 1,010,000
Tultex Corporation 10.625 3/15/05 1,000,000 1,000,000 1,070,000
USAir, Inc. 9.625 2/1/01 1,000,000 1,000,000 1,012,500
Venture Holdings Trust 9.750 4/1/04 1,015,000 1,015,000 918,575
Waban, Inc. 11.000 5/15/04 500,000 500,000 555,000
Wyndham Hotel Corp. 10.500 5/15/06 350,000 350,000 372,750
------------ ------------ ------------
Total Bonds $ 29,113,284 28,924,721 30,199,507
============ ============ ============
Warrants - .10%
Barringer Technologies, Inc. (B) 23,330 1,167 32,079
Central Rents, Inc. (B) 1,880 67,837 94,000
Western Transmedia Co., Inc. (B) 183,117 45,780 45,779
------------ ------------
Total Warrants 114,784 171,858
------------ ------------
<CAPTION>
Market Value
Cost at 12/31/96
Shares (Note 2B) (Note 2A)
------------- ------------- ------------
<S> <C> <C> <C>
Common Stock - 7.59%
America West Airlines, Inc. (B) 4,900 98,294 77,788
BA Merchant Services, Inc. (B) 7,000 108,500 125,125
Barringer Technologies, Inc. (B) 23,330 199,775 195,389
Benson Petroleum, Ltd. (B) 200,000 154,408 148,800
Chesapeake Energy Corporation (B) 17,500 1,176,875 973,438
Collins & Aikman Corporation (B) 40,200 240,834 251,250
Computer Horizons Corporation 38,850 342,825 1,495,725
Continental Airlines, Inc. (B) 35,000 936,250 988,750
Correctional Services, Inc. (B) 9,553 53,206 137,324
Data Documents, Inc. (B) 33,894 52 368,597
Entremed, Inc. (B) 31,550 486,375 512,688
Florist Transworld Delivery, Inc. (B) 14,686 41,258 73,430
Foodbrands America Inc. (B) 52,500 413,437 721,875
Forrester Research, Inc. (B) 1,400 22,400 36,050
4Health, Inc. (B) 13,000 73,125 71,500
GTech Holdings Corporation (B) 24,500 704,375 784,000
</TABLE>
- --------------------------------------------------------------------------------
20
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
December 31, 1996
<TABLE>
<CAPTION>
Market Value
Cost at 12/31/96
Corporate Public Securities: (Continued) Shares (Note 2B) (Note 2A)
------------ ------------ ------------
<S> <C> <C> <C>
Common Stock (Continued)
Hosiery Corporation of America 1,000 $ -- $ 45,000
Ingram Micro, Inc. (B) 3,500 63,000 80,500
Integrated Living Communities, Inc. (B) 59,500 476,000 342,125
LCS Industries, Inc. 35,000 546,831 507,500
Marker International (B) 70,000 437,500 376,250
Mastech Corporation 3,500 52,500 66,500
MEDIQ Incorporated (B) 150,000 574,147 956,250
Metris Companies, Inc. (B) 1,400 22,400 33,600
Monterey Resources, Inc. (B) 3,500 50,750 56,438
MSC Industrial Direct Co., Inc. (B) 8,600 291,325 318,200
Red Roof Inns, Inc. (B) 21,900 292,839 339,450
Staffing Resources, Inc. 105,000 577,500 1,575,000
Sweetwater, Inc. (B) 26,000 182,000 13,000
Ticketmaster Group, Inc. (B) 23,100 334,950 280,088
Univision Communications, Inc. (B) 17,500 402,500 647,500
Vimpel Communications (B) 5,250 107,625 124,031
Western Transmedia Co., Inc. (B) 405,590 760,889 354,891
------------ ------------
Total Common Stock 10,224,745 13,078,052
============ ============
Convertible Preferred Stock - 1.91%
Finova Finance Trust 2,050 102,500 106,600
Integon Corp. 11,490 583,450 620,460
Merrill Lynch & Co. 26,500 606,187 589,625
Microsoft Corporation 10,666 851,947 853,280
Occidental Petroleum Corporation 13,740 687,000 810,660
RXI Holdings, Inc. 214,457 214,457 214
Unocal Corporation 5,580 250,000 316,665
------------ ------------
Total Convertible Preferred Stock 3,295,541 3,297,504
------------ ------------
Total Corporate Public Securities 52,767,684 56,802,684
============ ============
<CAPTION>
Market Value
Due Principal Cost at 12/31/96
Short-Term Securities: Yield Date Amount (Note 2B) (Note 2A)
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Commercial Paper - .47%
Texas Utilities Electric Co. 7.252% 1/2/97 $ 820,000 $ 819,835 819,835
------------ ------------ ------------
Total Short-Term Securities $ 820,000 819,835 819,835
============ ============ ============
Total Investments - 117.50% $190,473,181 202,429,621
============ ============
Other Assets - 2.20 3,782,271
Liabilities - (19.70) (33,942,679)
------- ------------
Total Net Assets - 100.00% $172,269,213
====== ============
</TABLE>
(A) In each of the convertible note, warrant, convertible preferred and common
stock investments, the issuer has agreed to provide certain registration
rights.
(B) Non-income producing security.
- --------------------------------------------------------------------------------
21
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
December 31, 1996
INDUSTRY CLASSIFICATION
<TABLE>
<CAPTION>
Fair Value
at 12/31/96
Corporate Restricted Securities: (Note 2A)
-----------
<S> <C>
ADVERTISING - .99%
Ammirati & Puris, Inc. $ 1,265,134
Summey Outdoor Advertising, Inc. 432,813
------------
1,697,947
------------
AUTO PARTS - .33%
Monro Muffler Brake, Inc. 576,317
------------
BEVERAGES - .11%
Delta Beverage Group, Inc. 181,486
------------
BUILDING MATERIALS - 2.94%
Highland Homes Holdings, Inc. 2,271,584
Supreme Industries, Inc. 2,793,184
------------
5,064,768
------------
CHEMICAL - 2.22%
AccTech, LLC 3,824,465
------------
COMMUNICATIONS - 4.60%
Classic Sports, Inc. 773,333
Home Shopping Network 1,080,000
Latin Communications Group 3,249,503
SFX Broadcasting, Inc. 1,016,400
Telex Communications, Inc. 116,759
Time Warner, Inc. 1,682,040
------------
7,918,035
------------
ELECTRICAL EQUIPMENT/
ELECTRONICS - 11.83%
Catalina Lighting, Inc. 1,424,588
CompuCom Systems, Inc. 4,255,753
Control Devices, Inc. 2,038,144
Exide Electronics Group, Inc. 3,213,876
Intermetrics, Inc. 2,150,352
Mercury Computer Systems, Inc. 1,512,000
Nu Horizons Electronics Corp. 1,486,837
Precision Dynamics, Inc. 3,997,347
Thermo Electron Corporation 297,500
------------
20,376,397
------------
HEALTH CARE - 1.09%
D&K Wholesale Drug, Inc. 1,419,500
Renal Treatment Centers, Inc. 460,750
------------
1,880,250
------------
JEWELRY - .12%
Wright & Lato, Inc. 200,341
------------
MANUFACTURING-INDUSTRIAL AND
CONSUMER PRODUCTS - 26.02%
C&K Manufacturing and Sales Company 3,502,475
Consumer Product Enterprises, Inc. 2,289,575
Elgin National Industries, Inc. 2,215,204
Fleming Acquisition Corporation 2,824,555
Hein-Werner Corp. 1,142,719
Hudson River Capital 950,000
Hussey Seating Company 3,821,954
Imax Corporation 676,875
Jackson Products, Inc. 2,855,011
Kappler Safety Group, Inc. 3,405,417
Kuhlman Corporation 901,780
Maxtec International Corp. 1,249,680
PAR Acquisition Corp. 1,170,075
Plastipak Packaging, Inc. 3,503,443
Sequentia, Inc. 1,215,285
Star International Holdings, Inc. 2,422,063
Unidata, Inc. 2,693,625
Unipac Corporation 2,086,716
U.S. Netting, Inc. 2,521,983
U.S. Silica Company 3,374,119
------------
44,822,554
------------
METAL FABRICATING - .46%
Molton Metal Technology 793,500
------------
MISCELLANEOUS - 6.07%
Corporate Express, Inc. 532,950
Gorges/Quick to Fix Food 867,000
Greenfield Capital Trust, Inc. 689,975
Loral Space and Communications LTD 203,400
Marriott International, Inc. 562,500
NM Holdings LLC 1,995,880
Occusystems, Inc. 868,000
Omnicom Group 280,500
Parker Drilling Corporation 1,582,500
Protein Genetics, Inc. 1,968,151
United Waste Systems, Inc. 597,500
US Can Corporation 315,375
------------
10,463,731
------------
OIL AND GAS SERVICE - 11.15%
American Exploration Company 3,117,526
BP Prudhoe Bay Royalty Trust 445,060
Garnet Resources Corporation 200,000
Hardy Oil & Gas USA, Inc. 3,434,346
Maloney Industries, Inc. 2,735,667
PanEnergy Corporation 5,490,285
TransMontaigne Oil Company 3,791,832
------------
19,214,716
------------
RECREATIONAL SUPPLIES/
EQUIPMENT - .42%
The Coast Distribution System 727,596
------------
</TABLE>
- --------------------------------------------------------------------------------
22
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
December 31, 1996
INDUSTRY CLASSIFICATION (Continued)
<TABLE>
<CAPTION>
Fair Value
at 12/31/96
Corporate Restricted Securities: (Continued) (Note 2A)
-----------
<S> <C>
RETAILING - 5.20%
Cains Foods, L.P. $ 3,005,142
Fay's, Inc. 997,700
Grand Metropolitan PLC 710,250
Pharmaceutical Buyers, Inc. 1,445,941
Rent-Way, Inc. 2,140,670
The Sports Authority, Inc. 131,600
Sunglass Hut International, Inc. 522,000
------------
8,953,303
------------
SERVICES - 10.51%
Continental Airlines, Inc. $ 1,122,500
Continental Airlines, Inc. 761,250
Corrections Corporation of America 403,360
Diversco, Inc. 3,793,886
Piedmont Holding, Inc. 3,289,870
RailTex, Inc. 3,405,313
Team Rental Group, Inc. 1,803,270
Thermo Terratech, Inc. 82,800
Tidewater Holdings, Inc. 3,449,447
------------
18,111,696
------------
Total Corporate Restricted
Securities - 84.06% $144,807,102
============
</TABLE>
- --------------------------------------------------------------------------------
23
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements MassMutual Corporate Investors
- --------------------------------------------------------------------------------
1. History
MassMutual Corporate Investors (the "Trust") is a closed-end, non-
diversified investment company. Massachusetts Mutual Life Insurance Company
("MassMutual") acts as its investment adviser.
The Trust commenced operations in 1971 as a Delaware corporation. Pursuant to
an Agreement and Plan of Reorganization dated November 14, 1985, approved by
shareholders, the Trust was organized as a Massachusetts business trust
effective November 28, 1985.
2. Significant Accounting Policies
The following is a summary of significant accounting policies followed
consistently by the Trust in the preparation of the financial statements in
conformity with generally accepted accounting principles.
A. Valuation of Investments:
Nearly all securities which are acquired by the Trust directly from the
issuers and shares into which such securities may be converted or which may
be purchased on the exercise of warrants attached to such securities will be
subject to legal or contractual delays in or restrictions on resale and will
therefore be "restricted securities". Generally speaking, as contrasted
with open-market sales of unrestricted securities which may be effected
immediately if the market is adequate, restricted securities can be sold only
in a directly negotiated transaction to a limited number of purchasers or in
a public offering for which a registration statement is in effect under the
Securities Act of 1933.
The value of restricted securities, and of any other assets for which there
are no reliable market quotations, is the fair value as determined in good
faith by the Trustees. Each restricted security is valued by the Trustees as
of the time of the acquisition thereof and quarterly thereafter. The Trustees
have established guidelines to aid in the valuation of each security.
Generally, restricted securities are initially valued at cost or less at the
time of acquisition by the Trust. Values greater or less than cost are used
thereafter for restricted securities in appropriate circumstances. Among the
factors ordinarily considered are the existence of restrictions upon the sale
of the security by the Trust; an estimate of the existence and extent of a
market for the security; the estimated period of time during which the
security will not be freely marketable; the estimated expenses of registering
or otherwise qualifying the security for public sale; estimated underwriting
commissions if underwriting would be required to effect a sale; in the case
of a convertible security, whether or not it would trade on the basis of its
stock equivalent; if it is a debt obligation which would trade independently
of any equity equivalent, the current yields on comparable securities; the
estimated amount of the floating supply of such securities available; the
proportion of the issue held by the Trust; any changes in the financial
condition and prospects of the issuers; the existence of merger proposals or
tender offers affecting the issuers; and in addition any other factors
affecting fair value, all in accordance with the Investment Company Act of
1940. In making valuations, opinions of counsel are relied upon as to whether
or not securities are restricted securities and as to the legal requirements
for public sale.
When market quotations are readily available for unrestricted securities of
an issuer, restricted securities of the same class are generally valued at a
discount from the market price of such unrestricted securities. The Trustees,
however, consider all factors in fixing any discount, including the filing of
a registration statement for such securities under the Securities Act of 1933
and any other developments which are likely to increase the probability that
the securities may be publicly sold by the Trust without restriction.
The Board of Trustees of the Trust meets at least once in each quarter to
value the Trust's portfolio securities as of the close of business on the
last business day of the preceding quarter. This valuation requires the
approval of a majority of the Trustees of the Trust, including a majority of
Trustees who are not interested persons of the Trust (otherwise than as
Trustees) or of MassMutual. In making valuations, the Trustees will consider
reports by MassMutual analyzing each portfolio security in accordance with
the relevant factors referred to above. MassMutual has agreed to provide such
reports to the Trust at least quarterly.
The financial statements include restricted securities valued at $144,807,102
(84.06% of net assets) as of December 31, 1996 ($122,100,451 at December 31,
1995) whose values have been estimated by the Board of Trustees in the
absence of readily ascertainable market values. Due to the inherent
uncertainty of valuation, those estimated values may differ significantly
from the values that would have been used had a ready market for the
securities existed, and the differences could be material.
- --------------------------------------------------------------------------------
24
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
The values for corporate public securities are stated at the last reported
sales price or at prices based upon quotations obtained from brokers and
dealers as of December 31, 1996, subject to discount where appropriate, and
are approved by the Trustees.
Short-term securities with more than sixty days to maturity are valued at
market and short-term securities having a maturity of sixty days or less are
valued at amortized cost which approximates market value.
B. Accounting for Investments:
Investment transactions are accounted for on trade date. Dividend income is
recorded on the ex-dividend date. Interest income is recorded on the accrual
basis.
The cost basis of debt securities is not adjusted for amortization of premium
or accrual of discount since the Trust does not generally intend to hold such
investments until maturity; however, the Trust has elected to accrue for
financial reporting purposes, certain discounts which are required to be
accrued for federal income tax purposes.
Realized gains and losses on investment transactions and unrealized
appreciation and depreciation of investments are reported for financial
statement and federal income tax purposes on the identified cost method.
The Trust does not accrue income when payment is delinquent or when
management believes payment is questionable.
C. Use of Estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
D. Federal Income Taxes:
No provision for federal taxes on net investment income and short-term
capital gains is considered necessary because the Trust has elected to be
taxed as a "regulated investment company" under the Internal Revenue Code,
and intends to maintain this qualification and to distribute substantially
all of its net taxable income to its shareholders. In any year when net long-
term capital gains are realized by the Trust, management, after evaluating
the prevailing economic conditions, will recommend to the Trustees either to
designate the net realized long-term gains as undistributed and to pay the
federal capital gains taxes thereon or to distribute such net gains.
During the year ended December 31, 1996, net realized long-term capital gains
for financial reporting purposes and federal income tax purposes are
$17,745,549 and were retained by the Trust and taxed at the rate of 35%
thereon.
3. Management Fee
Under an investment services contract, MassMutual has agreed to invest for
its general account concurrently with the Trust in each restricted security
purchased by the Trust. MassMutual, in addition to originating and sharing in
the purchase of such securities, represents the Trust in any negotiations
with issuers, investment banking firms, securities brokers or dealers and
other institutions or investors relating to the Trust's investments.
MassMutual provides a continuing review of the investment operations of the
Trust. MassMutual also provides the Trust with office space and office
equipment, accounting and bookkeeping services, and necessary executive,
clerical and secretarial personnel for the performance of the foregoing
services.
Under the investment services contract, as amended July 1, 1988, the Trust
pays MassMutual a quarterly base rate (the "Base Fee Rate") of 5/16 of 1%
of the value of the Trust's net assets as of the end of each fiscal quarter,
approximately equivalent to 1.25% of the net asset value of the Trust on an
annual basis, plus or minus a quarterly performance adjustment (the
"Performance Adjustment") of up to 1/16 of 1%, approximately equivalent to
.25% on an annual basis.
The Performance Adjustment is based on the Trust's performance as compared to
a benchmark rate of return (the "Target Rate") equal to 5.0 percentage
points plus an unweighted, arithmetic average of the rates of return on the
Standard & Poor's Industrial Stock Price Index and the Lehman Brothers
Intermediate Corporate Bond Index over a rolling three-year period (the
"Measurement Period") comprising the twelve quarters ending on the last day
of each quarter (the "Valuation Date"). The Performance Adjustment is equal
to 5% of the difference between the Trust's actual rate of return over the
Measurement Period and the Target Rate. If the Trust's actual rate of return
exceeds the Target Rate, the Base Fee Rate is increased by an amount equal to
the Performance Adjustment; if the Trust's actual rate of return is less than
the Target Rate, the Base Fee Rate is reduced by the Performance Adjustment.
The advisory fee payable by the Trust is equal to the Base Fee Rate (as
adjusted by the Performance Adjustment) times the net asset value of the
Trust as of the Valuation Date. The Performance Adjustment for the quarter
ended December 31, 1996 was plus .0625%.
- --------------------------------------------------------------------------------
25
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
4. Note Payable
On November 5, 1993, the Trust sold to MassMutual at par a $20,000,000 Senior
Fixed Rate Convertible Note due November 15, 2000 (the "Note") which accrues
at 5.33% per annum. The Note holder, at its option, can convert the principal
amount of the Note into common shares. The dollar amount of principal would
be converted into an equivalent dollar amount of common shares based upon the
average price of the common shares for ten business days prior to the notice
of conversion.
5. Purchases and Sales of Investments
<TABLE>
<CAPTION>
For the For the
year ended year ended
12/31/96 12/31/95
--------------- --------------
Cost of Investments Acquired
----------------------------
<S> <C> <C>
Corporate restricted securities $ 67,144,607 $ 63,271,738
Corporate public securities 58,132,257 55,424,224
Short-term securities 280,873,961 299,130,572
Proceeds from Sales or Maturities
---------------------------------
Corporate restricted securities $ 51,416,597 $ 42,811,069
Corporate public securities 77,992,854 72,653,154
Short-term securities 283,413,909 300,950,880
</TABLE>
The aggregate cost of investments is the same for financial reporting and
federal income tax purposes as of December 31, 1996. The net unrealized
appreciation of investments for financial reporting and federal tax purposes
as of December 31, 1996 is $11,956,440 and consists of $26,300,472
appreciation and $14,344,032 depreciation.
The aggregate cost of investments was the same for financial reporting and
federal income tax purposes as of December 31, 1995. The net unrealized
appreciation of investments for financial reporting and federal tax purposes
as of December 31, 1995 was $19,565,837 and consisted of $30,335,970
appreciation and $10,770,133 depreciation.
6. Quarterly Results of Investment Operations (Unaudited)
<TABLE>
<CAPTION>
Per Per
Amount Share Amount Share
------------ ------- ------------ -------
March 31, 1996 March 31, 1995
-------------------- --------------------
<S> <C> <C> <C> <C>
Investment income $ 3,739,245 $ 3,623,939
Net investment income 2,758,149 $ .65 2,738,763 $ .64
Net realized and unrealized
(loss) gain on investments (763,492) (.18) 5,667,087 1.33
June 30, 1996 June 30, 1995
-------------------- --------------------
Investment income 3,735,914 3,721,895
Net investment income 2,701,597 .64 2,729,955 .64
Net realized and unrealized
gain on investments 9,604,490 2.26 14,705,181 3.45
September 30, 1996 September 30, 1995
-------------------- --------------------
Investment income 4,098,479 3,857,326
Net investment income 3,083,855 .72 2,873,688 .68
Net realized and unrealized
gain on investments 2,196,599 .51 5,860,438 1.38
December 31, 1996 December 31, 1995
-------------------- --------------------
Investment income 3,737,217 3,844,975
Net investment income 2,731,679 .64 2,835,245 .67
Net realized and unrealized
(loss) gain on investments (3,197,367) (.75) 6,754,547 1.59
</TABLE>
- --------------------------------------------------------------------------------
26
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of MassMutual Corporate Investors
We have audited the accompanying statement of assets and liabilities of
MassMutual Corporate Investors as of December 31, 1996 and 1995, including the
schedule of investments, as of December 31, 1996, and the related statements of
operations, cash flows and changes in net assets for each of the years then
ended, and the financial highlights for each of the ten years in the period
ended December 31, 1996. These financial statements and financial highlights are
the responsibility of the Trust's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1996 by correspondence with the custodian and broker. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
MassMutual Corporate Investors as of December 31, 1996 and 1995, the results of
its operations, its cash flows and the changes in its net assets for each of the
years then ended, and the financial highlights for each of the ten years in the
period ended December 31, 1996, in conformity with generally accepted accounting
principles.
/s/ Coopers & Lybrand L.L.P.
Springfield, Massachusetts
January 31. 1997
- --------------------------------------------------------------------------------
27
